GOOD AFTERNOON

STABILITY AND GROWTH STRATEGY:-A GAME CHANGER FOR ORGANISATION

PRESENTED BY BIKASH KUMAR NAYAK BALARAM

BEHERA SUMIT KUMAR DAS

INTRODUCTION

• Corporate strategies, also known as grand or root strategies, are fundamentally concerned with the selection of businesses in which an organisation should be in and with the development and coordination of the portfolio.

CORPORATE LEVEL STRATEGY

Analysing Internal

Environment

Analysing External

Environment

SWOT ANALYSIS

Corporate growth

strategy

Corporate stability

strategy

Corporate

retrenchement

strategy

FORMS OF CORPORATE LEVEL STRATEGY

• STABILITY• GROWTH• RETRENCHMENT

STABILITY STRATEGY

Stability strategy also implies focusing on improvements of functional performances and maintaining the level of achievement as in the immediate past.

FORMS OF STABILITY STRATEGIES

• Stability through diversification• Stability through minor functional strategies

WHEN TO PURSUE STABILITY STRATEGIES?

• The organisation is serving defined market

• The organisation continues to pursue same objective

• There is scope for incremental improvement of functional performance in the same line business

WHY TO PURSUE THE STABILLITY STRATEGY?

• It is less risky• The environmental faced is relatively stable.• Expansion may be perceived as being

threatening.• satisfactory level of profit rather than

increased profit.• Operate in a low growth or no growth

industry.

HOW TO PURSUE STABILITY STRATEGY AND FORMED?

• MAINTAINCE OF STASTUS QUO• SUSTAINBLE GROWTH• PAUSE/PROCEED WITH CAUTION STARATEGY• NO CHANGE STRATEGY• PROFIT STARATEGY

STABILITY STRATEGY IN CONTEXT OF INDIAN COMPANES

• SAIL has adopted stability strategy because of over capacity in steel sector. Instead of increasing operational efficiency of its various plants.

• Cement, chemicals, plastics, banking, fertilizers, iron and steel industry adopt it.

FAILURE OF STABILITY STRATEGIES

• CHANGE IN ENVIRONMENT• TECHNOLOGICAL ADVANCEMENT• CHANGE IN CUSTOMER TASTE AND

PREFERENCE

GROWTH

A growth strategy is one that an enterprise pursue when it increases its level objectives upward in significant increment, much higher than an exploration of its past achievement level, the most frequent increase indicating a growth strategy is to rise the market share and sales objectives upward significantly

WHY TO PURSUE GROWTH?

• Growth is necessary for survival in future• Growth offers large scale of opeeration• Growth strategy is taken up because

motivation to do so• Intangible advantage of growth

INTERNAL GROWTH ROUTE

Expansion. The process of expansion :1. Determine options for capacity expansion2. Access future cost & demand of inputs.3. Access probable technological change4. Predict capacity addition by competitors5. Access demand & supply in industry6. Determine expected cash flow from expansion.7. Test the analysis for consistency.

GROWTH STRATEGIESCHART

GROWTH STRATEGIES

INTERNAL GROWTH

CONCENTRIC EXPANSION

DIVERSIFICATION

INTEGRATION

EXTERNAL GROWTH

MERGER ACQUISITION JOINT VENTURE

STRATEGIC ALLIANCE

It involves converging resourses in one or more of firms business in terms of their customer needs, customer function or alternative technologies, the aim is to to expand organizations present business

CONCENTRIC EXPANSION

DIVERSIFICATION• Diversification : Entry of an organization into a

business which is new to an organization either market wise or technology wise or both.

• Types of diversification : • Horizontal integration : Entering similar products or

product lines.• Concentric Diversification : Some similar factors can

be used by diversification. E.g. : A tea company starts producing other food products to take advantage of its distribution network etc.

• Conglomerate diversification : Company enters entirely different product – market segments.

INTEGRATION

• Vertical Integration :• Backward Integration : Takes place when a

company looks for various options through which it can own an important source of raw material.

• Forward integration : Takes place when a company looks for various options through which it can own a distribution network for its products.

FORM OF EXTERNAL GROWTH STRATEGY

• MERGER• ACQUISITION• JOINT VENTURE• STRATEGIC ALLIANCE

MERGER

A Merger is a combination of two or more businesses in which one acquires the asset and liabilities of the other in exchange for stock or cash or both.

WHY MERGER TAKE PLACE?

• To increase the value of the firm’ stock• To increase the growth rate of the firm• To make a good investment• To improve the stability of the firm’s earnings

and sales• To balance or fill out the product line• To diversify the product line when the current

product have reached their in peak in life cycle

PROS OF MERGER

• The firm enjoys economies of scale• To utilise the fund in maximising way• The firm will be in a position to diversify the

activities• The more effective and efficient utilisation of

resources• Revival of sick unit

CONS OF MERGER

• The psychological problem of the top management of merging the firm

• Negative attitude of the senior partner towards the junior partner

• The merger leads to the concentration of economic power, monopolistic conditions and thereby political power, higher prices, restricted supply etc.

WHY TO FAILURE OF MERGER?

• Paying too much for the acquired firm• Assuming that a growing market or product

will continue its recent outstanding performances

• Leaping into a merger without carefully studying its consequences

• Buying too large firm and thus incurring an excessively large debt

ACQUISITIONS OR TAKEOVER

Takeover is the attempt of one firm to acquire ownership or control over another firm against the wishes of latter’s management

WHY TO TAKE PLACE THE TAKE OVER?

• To reduce the competition by purchasing a competitor

• To acquire the needed resources quickly• For tax reasons it may be desirable to

purchase a firm with tax losses which will offset the current or future earning

• To increase efficiency and profitability

PROS OF TAKEOVER

• Takeover ensure management accountability• Takeover provide easy growth opportunities• They create mobility of resources from one

activity to another activity• They avoid gestation periods and problems

involved in new projects• They provide the chances of survival to the sick

units and alternatives to the disinvestment strategy

CONS OF THE TAKE OVER

• Professionalization of the management may be replaced by money power

• Takeover do not create any real asset to the society

• They result in monopoly and in connection of economic power

• They are detrimental to the society• Interests of the minority shareholders are not

protected

JOINT VENTURE

Joint venture are the partnerships in which two or more firms carry out a specific project or corporate in a selected area of business.

PROS OF THE JOINT VENTURE

• To spread development costs• JV allows the firms the expertise in different

fields to combine their knowledge• JV are more useful in entering international

market• JV provide quick access to channels of

distribution• JV provide the facility of foreign technology to

the host partner

CONS OF THE JOINT VENTURE

• Problems of equity participation by the foreign and home partner

• Foreign exchange regulation imposed by both the GOVT.

• Division of profits with other partner• Loss control of other firm• Differences of culture and customs of both the

partner

STRATEGIC ALLIANCE

Strategic alliance is another form of combining the efforts of two or more organisations to develop competitive advantage. In strategic alliance, two or more partners join together for certain specified objectives and for certain period.

REASONS FOR STRATEGIC ALLIANCE

• Entering new markets• Reducing manufacture costs• Developing and diffusing technology

CONCLUSION

• TO SUM UP, WE CONCLUDE THAT BOTH STABILITY AND GROWTH STRATEGY ARE REALLY A GAME CHANGER FOR ORGANISATION,IF ORGANISATION PREDICTS ITS ENVIRONMENTAL FACTOR CORRECTLY AND CAPITALISE ITS SRTENGTH TO OVERCOME THREAT IN RIGHT MANNER OR OTHERWISE IT FINALLY END TO DOOM.

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